Why Unlimited Paid Time Off Is Bad for Your Employees

Netflix and LinkedIn's policies are not helping their employees. Here's why.

Just last month, President Obama issued an order that all companies that do work for the government must, by 2017, provide a minimum of 7 paid days off per year to their employees. He also asked Congress to pass a law doing the same for companies with more than 15 employees, a request that will very likely be ignored at least through the next Presidential election. The Presidential candidates have all taken sides on this issue too. Hillary Clinton has endorsed the President's position. Republican candidates like Bush and Trump are mostly mum on the issue (Bush, actually, has said he thinks American's should "work more"). Cities around the country are not waiting around--many are moving forward with their own PTO policies. Washington DC, for example, looks certain pass the country's most generous PTO policy for public workers- 16 weeks per year!

Oh, and then there's LinkedIn and Netflix.

Earlier this year, Netflix announced that it would be giving "unlimited" paid time off for new parents for up to 12 months. Other big named companies have also been offering their own super-generous PTO packages. Virgin staffers can take as much vacation as they'd like. In this article, it's said that Twitter doesn't track vacation days and CarMax leaves vacation time up to the discretion of its employees. A bunch of other younger companies, according to this report, are following suit. Not satisfied with just giving time off to their own employees, both Microsoft and Facebook now require their contractors to also provide paid time off. Not to be outdone, LinkedIn yesterday announced that all of its employees would be getting "unlimited" paid time off...for as long as they like!

Unlimited paid time off? Not tracking vacations? Are these companies crazy? No, they're very, very smart. They're getting great publicity for these moves. But more importantly: they're actually cutting down on their employees' vacation time.

Know what it's like to work for Netflix or LinkedIn? It's not easy. These are both good companies to work for. They get high ratings on employer evaluation sites like Glassdoor and the employees I know always speak well of them. But they, like so many other companies in this busy economy are competing for a very narrow pool of good, reliable and qualified employees who have the development, programming, security and database skills required for their very specialized jobs. It's important for them to offer great compensation and benefits packages. But, once signed, the work is tough. Employees at these companies are known to put in long, long hours. There is a great deal of pressure to stay ahead in the midst of intense competition. Management is under significant stress and scrutiny from stockholders, Wall Street and the media to deliver, grow and succeed. We're all familiar with the crazy and competitive Silicon Valley environment.

Which is why offering unlimited paid time is a great idea for the employer, and not the other way around..

What competitive, driven, career-minded employee is going to take advantage of this? Do you mean to tell me that the guy who just became a father is going to tell the rest of the team working on that big project that he's going to take the next 11 months off to "stay at home and spend time with my baby." Really? Sure, he now has that option. But who's going to pull that trigger? And who's going to risk suddenly disappearing from the office for months on end, travelling to Australia or kicking back with a cold one on the beach while the rest of his co-workers are working away on deadline? And what happens a year later when evaluation time comes? Who gets that promotion, that salary increase, that corner office--the guy who's been working day and night on that product launch or the other guy who's been taking full advantage of the company's "paid time off" policy and working on his golf swing.

Exactly.

Paid time off is a publicity stunt. Most companies know that their best employees aren't going to take advantage of it. And by leaving the policy open and "up to the employee" managers are now creating a different kind of competitive environment, one that encourages taking less time off, rather than more. "Hey," one guy says to the other, "I know we get unlimited paid time off, but I've only taken two days off in the past three years, and that was because I lost my leg in that bike accident. Talk about dedication, right?" This type of silly policy doesn't benefit the employee. It actually benefits the employer more. It creates more competition to take fewer days off.

Back to the real world. You're not the CEO of Netflix, LinkedIn or any other billion-dollar-valuation "unicorn" in Silicon Valley, right? You run a smaller company that makes or distributes stuff. You are based in Ohio, or Florida or North Carolina. Your employees work hard. But they like their time off too. If there's anything to take away from the paid time off story it's this: it's news, it's a campaign issue and your employees are watching. No one says you should offer "unlimited" time off. But it may be time to dust off your paid time off and vacation policies and consider expanding it a bit more. Competitive times require competitive actions. Just don't leave the choices entirely up to your employees. You're not helping them if you do so.